T A K I N G A C O M P R E H E N S I V E

A P P R O A C H I N Y O U R F I N A N C I A L L I F EACHIEVING FINANCIAL FREEDOM IN RETIREMENT     

TAKING A COMPREHENSIVE APPROACH TO YOUR FINANCIAL LIFE

[2]

Taking a Comprehensive Approach toYour Financial Life

M oney means different things to different people.

Each of us has different dreams. You may want to achieve

financial freedom so that you never have to work again—even if you plan

on working the rest of your life. You may want to make a top-level college

education possible for your children or grand-

children. You might want to provide the seed

capital that will give your children or grandchil-

dren a great start in life, whether that’s with a

home or a business. You may dream of a vaca-

tion home on the beach or in the mountains. Or

you may have achieved tremendous success

throughout your career and want to leave

behind an enduring legacy that will enable your

favorite charity to continue its work.

Whatever your dreams are, you need a frame-

work for making wise decisions about your

money that will help enable you to achieve all

that is important to you. Chances are good that

you have a wide range of financial goals, as well

as diverse financial challenges.

Common sense tells us that such a broad

range of issues requires a broad comprehensive

outlook. It’s for this reason that most affluent

clients want their financial advisors to help

them with more than just investments. They

want real wealth management—a complete

approach to addressing their entire financial

lives.

As you’ve probably noticed, many financial

firms these days say that they offer wealth man-

agement. The trouble is that many of these firms

just provide investment management and offer

a couple of extra services—such as college edu-

cation planning and estate planning—and call

that wealth management. So the challenge for

anyone who wants help addressing all his or her

financial needs is finding a firm that provides

true wealth management.

We define wealth management as a formula:

WM = IC + AP + RM

Investment consulting (IC) is the astute man-

agement of investments over time to help

303-741-9772

TAKING A COMPREHENSIVE APPROACH TO YOUR FINANCIAL LIFE

[3]

achieve financial goals. It requires advisors to

deeply understand their clients’ most important

challenges and then to design an investment

plan that takes their clients’ time horizons and

tolerance for risk into account and that describes

an approach that will help maximize clients’

probability of achieving their goals. It also

requires advisors to monitor both their clients’

portfolios and their financial lives over time so

that they can make adjustments to the invest-

ment plan as needed.

Advanced planning (AP) goes beyond invest-

ments to look at all the other aspects that are

important to your financial life. We break it

down into four parts: wealth enhancement,

wealth transfer, wealth protection and charita-

ble giving. In our experience, very few financial

advisors offer these services.

Relationship management (RM) is the final

element. True wealth managers are focused on

building relationships within three groups.

The first and most obvious group is their clients.

To address their clients’ needs effectively,

they must foster solid, trusted relationships

with them. Second, wealth managers must man-

age a network of financial professionals—

experts they can call in to address specific client

needs. Finally, wealth managers must be able to

work effectively with their clients’ other profes-

sional advisors, such as their attorneys and

accountants.

Our focus in this resource guide will be on

the first element of wealth management—

investment consulting. But bear in mind that

managing your investments is just one part of a

comprehensive approach to your financial life.

At the end of this guide, we’ll describe what you

should expect from a true wealth manager so

that you can make an informed decision when

choosing which financial professional to work

with.

Let’s turn now to our discussion of the con-

cepts that can make you a more successful

investor.

www.DechtmanWealth.com

TAKING A COMPREHENSIVE APPROACH TO YOUR FINANCIAL LIFE

[4]

Rising Above the Noise

Some investment professionals may seem like they are

speaking a different language. As experts in their field, its

easy to assume investors understand every term and concept, but

frequently the jargon becomes confusing and even intimidating.

But investing is actually not that complicated.

It can be broken down into two major beliefs:

� You believe in the ability to make superior

security selections, or you don’t.

� You believe in the ability to time markets, or

you don’t.

Let’s explore which investors have which

belief systems and where you should be with

your own beliefs.

Exhibit 1 classifies people according to how

they make investing decisions. Quadrant one is

the noise quadrant. It’s composed of investors

who believe in both market timing and superior

investment selection. They think that they (or

their favorite financial guru) can consistently

uncover mispriced investments that will deliver

market-beating returns. In addition, they believe

it’s possible to identify the mispricing of entire

market segments and predict when they will

turn up or down. The reality is that the vast

majority of these methods fail to even match

the market, let alone beat it.

Unfortunately, most of the public is in this

quadrant because the media play into this think-

ing as they try to sell newspapers, magazines

and television shows. For the media, it’s all about

getting you to return to them time and time

again.

Quadrant two is the conventional wisdom

quadrant. It includes most of the financial serv-

ices industry. Most investment professionals

have the experience to know they can’t predict

broad market swings with any degree of accu-

racy. They know that making incorrect predic-

tions usually means losing clients. However,

they believe there are thousands of market ana-

lysts and portfolio managers with MBAs and

high-tech information systems who can find

undervalued securities and add value for their

clients. Of course, it’s the American dream to

believe that if you’re bright enough and work

hard enough, you will be successful in a com-

petitive environment.

303-741-9772

TAKING A COMPREHENSIVE APPROACH TO YOUR FINANCIAL LIFE

[5]

As un-American as it seems, in an efficient

capital market this methodology adds no value,

on average. While there are debates about the

efficiency of markets, most economists believe

that, fundamentally, capital markets work.

Quadrant three is the tactical asset allocation

quadrant. Investors in this quadrant somehow

believe that, even though individual securities

are priced efficiently, they (and only they) can

see broad mispricing in entire market sectors.

They think they can add value by buying when a

market is undervalued, waiting until other

investors finally recognize their mistake and

selling when the market is fairly valued once

again. We believe that it’s inconsistent to think

that individual securities are priced fairly but

that the overall market, which is an aggregate of

the fairly priced individual securities, is not. No

prudent investors are found in this quadrant.

Quadrant four is the information quadrant.

This is where most of the academic community

resides, along with many institutional investors.

Investors in this quadrant dispassionately

research what works and then follow a rational

course of action based on empirical evidence.

Academic studies indicate that investments in

the other three quadrants, on average, do no bet-

ter than the market after fees, transactions costs

and taxes. Because of their lower costs, passive

investments—those in quadrant four—have

higher returns on average than the other types

of investments.1

Our goal is to help investors make smart deci-

sions about their money. To accomplish this, we

help investors move from the noise quadrant

to the information quadrant. We believe this is

where you should be to maximize the probabil-

ity of achieving all your financial goals.

EXHIBIT 1THE INVESTMENT DECISION MATRIX

Market Timing

Yes No

Noise Quadrant Conventional Wisdom Quadrant

1 2

YesFinancial planners

Most individual investors Stock brokers

Financial journalists Most mutual fundsSecurity

SelectionTactical Allocation Quadrant Information Quadrant

3 4

NoPure market timers Academics

Asset allocation funds Many institutional investors

Source: CEG Worldwide.

1 Michael C. Jensen, “The Performance of Mutual Funds in the Period 1945–1964,” Journal of Finance, May 1968.

Mark M. Carhart, Jennifer N. Carpenter, Anthony W. Lynch and David K. Musto, “Mutual Fund Survivorship,” unpublishedmanuscript, September 12, 2000.

Christopher R. Blake, Edwin J. Elton and Martin J. Gruber, “The Performance of Bond Mutual Funds,” The Journal of Business,1993: 66, 371–403.

Edwin J. Elton, Martin J. Gruber, Sanjiv Das and Matt Hlavka, “Efficiency with Costly Information: AReinterpretation of Evidence from Managed Portfolios,” The Review of Financial Studies, 1993: 6, 1–22.

www.DechtmanWealth.com

Securities offered through Securities America, Inc. Member FINRA/SIPC. Jordan Dechtman and Sam Dechtman, Registered Representatives Advisory services offered through Securities America Advisors, Inc., an SEC Registered Investment Advisory Firm. Jordan Dechtman Sam Dechtman and Adam Dechtman, Registered Investment Advisor Representative. Dechtman Wealth Management and Securities America companies are unaffiliated. Securities America and its representatives do not provide tax or legal advice.

Connecting the dots to form a successful retirement requires tremendous effort. It takes hard work leading up to retirement, careful

planning after retirement, and diligent execution of a suitable investment strategy throughout retirement. Don’t leave your retirement to chance.

Let us help you connect the dots.

Let us help you connect the dots.

Let our team help you!

Call us today at

303-741-9772